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Memorandum of law Document Transcript

  • 1. UNITED STATES DISTRICT COURTWESTERN DISTRICT OF NEW YORK------------------------------------ xPAUL D. CEGLIA, : : Plaintiff, : : v. Civil Action No. 1:10-cv-00569- : RJA :MARK ELLIOT ZUCKERBERG and :FACEBOOK, INC., : : Defendants. x------------------------------------ DEFENDANTS’ MEMORANDUM OF LAW IN SUPPORT OF THEIR MOTION FOR EXPEDITED DISCOVERYThomas H. Dupree, Jr. Orin SnyderGIBSON, DUNN & CRUTCHER LLP Alexander H. Southwell1050 Connecticut Avenue, NW GIBSON, DUNN & CRUTCHER LLPWashington, DC 20036 200 Park Avenue, 47th Floor(202) 955-8500 New York, NY 10166-0193 (212) 351-4000Terrance P. FlynnHARRIS BEACH PLLC726 Exchange StreetSuite 1000Buffalo, NY 14210(716) 200-5120June 2, 2011
  • 2. TABLE OF CONTENTS PageINTRODUCTION .......................................................................................................................... 1FACTUAL AND PROCEDURAL BACKGROUND.................................................................... 4 1. Zuckerberg’s Work For StreetFax In 2003............................................................. 4 2. In 2010, Ceglia Reappears And Claims To Own 84 Percent Of Facebook, Inc..................................................................................................... 5 3. Ceglia Abandons His Original Claims And Changes His Story............................. 6CEGLIA’S DOCUMENTS ARE FORGERIES............................................................................. 7 1. The Purported Contract Is A Forgery. .................................................................... 7 2. The Purported Emails Are Forgeries. ................................................................... 10 3. Ceglia’s Long History Of Scams And Criminal Misconduct. .............................. 13ARGUMENT................................................................................................................................ 15 I. Federal Courts Have Broad Discretion To Order Expedited, Staged Discovery. ............................................................................................................. 16 II. Defendants Have Demonstrated Good Cause....................................................... 19 A. Expedited Discovery Is Warranted To Prevent Fraud On The Court And Further Tampering With Electronic Records.................................... 19 B. Expedited Discovery Will Not Prejudice Ceglia. ..................................... 21 C. Defendants Seek Narrowly Tailored Relief.............................................. 22CONCLUSION............................................................................................................................. 23 i
  • 3. TABLE OF AUTHORITIES Page(s) Cases Affymetrix, Inc. v. PE Corp., 219 F. Supp. 2d 390 (S.D.N.Y. 2002)..................................................................................... 19Amari v. Spillan, 2008 WL 5378339 (S.D. Ohio Dec. 19, 2008) ....................................................................... 17Ayyash v. Bank al-Madina, 233 F.R.D. 325 (S.D.N.Y. 2005) ................................................................................ 16, 17, 20Ceglia v. Zuckerberg, 2011 WL 1108607 (W.D.N.Y. Mar. 28, 2011)......................................................................... 6Crawford-el v. Britton, 523 U.S. 574 (1998)................................................................................................................ 18Damiano v. Sony Music Entertainment, Inc., 168 F.R.D. 485 (D.N.J. 1996)................................................................................................. 19Mann v. Levy, 776 F. Supp. 808 (S.D.N.Y. 1991).......................................................................................... 19Occidental Chem. Corp. v. OHM Remediation Servs., 168 F.R.D. 13 (W.D.N.Y. 1996)............................................................................................. 18OMG Fidelity, Inc. v. Sirius Technologies, Inc., 239 F.R.D. 300 (N.D.N.Y. 2006)...................................................................................... 16, 21Physicians Interactive v. Lathian Systems Inc., 2003 WL 23018270 (E.D. Va. Dec. 5, 2003) ............................................................... 4, 17, 20Semitool, Inc. v. Tokyo Electron Am., Inc., 208 F.R.D. 273 (N.D. Cal. 2002)...................................................................................... 18, 21Stern v. Cosby, 246 F.R.D. 453 (S.D.N.Y. 2007) .................................................................................. 4, 16, 19U.S. Commodity Futures Trading Commission v. Atwood & James, Ltd., 2009 WL 666970 (W.D.N.Y. Jan. 23, 2009).......................................................................... 17UnitedHealthCare Services v. Miller, No. 1:09-cv-00276-RJA-LGF (W.D.N.Y. Apr. 20, 2009) ..................................................... 17 ii
  • 4. TABLE OF AUTHORITIES (Continued) Page(s) Statutes & Rules Fed. R. Civ. P. 26................................................................................................................ 3, 16, 18 Other Authorities John Anderson, Ceglia saved e-mails to Facebook CEO Zuckerberg from Fassett House, WELLSVILLE DAILY, Apr. 13, 2011......................................................................................... 20John Cassidy, Me Media: How Hanging out on the Internet became big business, THE NEW YORKER, May 15, 2006 .................................................................................................... 7Geoffrey A. Fowler and Scott Morrison, Fight over Facebook Origins Escalates, WALL ST. J. B1 (Apr. 13, 2011) .......................................................................................................... 3Kashmir Hill, Facebook Calls Paul Ceglia A “Scam Artist” In The Other Facebook Ownership Lawsuit, www.forbes.com (May 26, 2011).......................................................... 21Claire Hoffman, The Battle For Facebook, ROLLING STONE, Jun. 26, 2008.................................. 7David Kirkpatrick, THE FACEBOOK EFFECT (2010) ........................................................................ 7Lesley Stahl, The Face Behind Facebook, 60 MINUTES – CBS NEWS, Jan. 13, 2008, www.cbsnews.com/stories/2008/01/10/60-minutes/main3697442.shtml ................................ 7Alan J. Tabak, Hundreds Register for New Facebook Web site – Facemash creator seeks new reputation with latest online project, THE HARVARD CRIMSON, Feb. 9, 2004 .................. 8Bob Van Voris, Facebook Would-Be Owner Says He Owes His Claim to Arrest, Bloomberg, Aug. 2, 2010.......................................................................................................... 5Jose Antonio Vargas, The Face of Facebook, THE NEW YORKER, Sept. 20, 2010......................... 7 iii
  • 5. DEFENDANTS’ MEMORANDUM OF LAW IN SUPPORT OF THEIR MOTION FOR EXPEDITED DISCOVERY Defendants Mark Zuckerberg and Facebook, Inc. respectfully move this Court to grantexpedited, phased discovery and to issue an order: (a) compelling immediate production of theoriginal signed version of the purported contract attached to the Amended Complaint, the nativeelectronic version of that document, and all copies of the purported contract in electronic or hard-copy form; (b) compelling immediate production of the purported emails described in theAmended Complaint in their original, native electronic form, as well as all copies of thepurported emails in electronic or hard-copy form; and (c) immediately seizing, and permittingDefendants to inspect, every computer in Plaintiff Paul Ceglia’s possession, custody, or control,including the computers at his parents’ house. Because this discovery will bring this case to animmediate end by establishing that the purported contract and emails are forgeries, this Courtshould order that all other discovery be stayed until Defendants’ requested discovery iscompleted. INTRODUCTION Paul Ceglia alleges that he owns a substantial share of Facebook, Inc., and bases hisclaims on what he says is a contract signed by Mark Zuckerberg and emails memorializing theirpurported partnership. The contract is a cut-and-paste job, the emails are complete fabrications,and this entire lawsuit is a fraud. Zuckerberg has now declared under oath that he did not sign the contract attached toCeglia’s complaint, and that he did not write or receive any of the purported emails quoted in theAmended Complaint. See Zuckerberg Decl., ¶¶ 5, 14. Moreover, Defendants retained digitalforensic examiners to review Zuckerberg’s Harvard email account and found none of thepurported emails in it. See Rose Decl., ¶ 7. What they did find were the genuine emails between 1
  • 6. Ceglia and Zuckerberg from the same time period — and those emails directly contradictCeglia’s made-up story. Id., ¶ 8. Ceglia and Zuckerberg did exchange emails, and did sign anagreement, but their discussions and agreement concerned only some coding work thatZuckerberg performed for StreetFax.com — a web site that posted photographs of trafficintersections for use by insurance adjustors. Zuckerberg and Ceglia never discussed Facebookand they never signed a contract concerning Facebook — a fact that is not surprising given thatZuckerberg did not even conceive of Facebook until long after the purported contract was signedin April 2003. Zuckerberg Decl., ¶ 11. Ceglia appears to have doctored the genuine contract —which concerns StreetFax and StreetFax alone — and then fabricated emails to make it appearthat he and Zuckerberg were actually discussing and reaching agreements about Facebook. One of the nation’s top experts in document authentication has examined the purportedcontract and concluded that it is an “amateurish forgery.” Romano Decl., ¶ 16. The document isriddled with numerous tell-tale signs of fraud, such as the fact that page 1 (which purports toconvey an interest in “The Face Book”) has different margins and formatting from page 2 (whichcontains the signatures, yet does not mention “The Face Book”). Moreover, although thepurported contract is dated April 2003, page 1 refers to “StreetFax LLC” — an entity that wasnot created until August 2003. Ceglia’s claim that he signed a contract with Zuckerberg entitling him to a significantownership share of Facebook, Inc. — and then forgot about it for seven years — is incredible onits face, and the many indicators of fraud that permeate this case would call into serious questionthe allegations of any plaintiff. But Paul Ceglia is not just any plaintiff. He is a convicted felonand well-known scam artist who has spent the last decade of his life ripping people off. Anypossible doubt that this lawsuit is a fraud evaporates when one considers Ceglia’s long criminal 2
  • 7. history, which includes a first-degree felony conviction in Texas in 1997; an arrest, followed bya no-contest plea, in Florida in 2005; a land scam that Ceglia orchestrated in the mid-2000s thatincluded fraudulent sales of property in New York and Florida facilitated by falsifiedgovernment documents; and criminal and civil charges in 2009 brought by the Allegany CountyDistrict Attorney’s Office and the New York Attorney General’s Office for defrauding citizensin upstate New York through a scam involving the sale of wood pellets used to heat homes. SeeHenne Decl. ¶¶ 5-24. As then-Attorney General Andrew Cuomo publicly stated: Paul Cegliahas “repeatedly lied” in his efforts to cheat and defraud. Id., Ex. B. The fact that Ceglia has spent the past seven years as a hustler engaged in various landswindles and wood-pellet scams further highlights the fraudulent nature of his claims in thiscase. If Ceglia were in fact the owner of a substantial stake in Facebook, why would he haveresorted to a life of crime? Ceglia has refused to produce the original version of the purported contract; he has failedeven to produce copies of the alleged emails; and his own lawyer admitted to the Wall StreetJournal that he was initially “skeptical of Mr. Ceglia’s claims.” Geoffrey A. Fowler and ScottMorrison, Fight over Facebook Origins Escalates, WALL ST. J. B1 (Apr. 13, 2011). Ceglia’slawyer nonetheless asserted that the contract was “authentic” because he “brought in an outsideexpert to examine the computer file used to create the contract and to verify when it was firstcreated.” Id. Defendants are entitled to test that assertion before they are unfairly subjected tomonths of full-blown discovery in a case that rests on what will quickly be shown to be forgeddocuments. Federal Rule of Civil Procedure 26(d)(1) empowers this Court to order expediteddiscovery based on a showing of reasonableness and good cause — a standard that courts have 3
  • 8. deemed satisfied where there has been a showing of possible fraud on the court or a need topreserve electronic evidence before it can be tampered with or destroyed. See, e.g., Stern v.Cosby, 246 F.R.D. 453, 457 (S.D.N.Y. 2007) (granting expedited discovery to prevent possiblefraud on the court); Physicians Interactive v. Lathian Systems Inc., 2003 WL 23018270 (E.D.Va. Dec. 5, 2003) (granting expedited discovery to preserve electronic evidence). The facts that Defendants have already gathered overwhelmingly establish that goodcause exists to permit Defendants to take expedited, surgically-targeted discovery that willreadily establish that the contract and emails are fabricated, and that this lawsuit is nothing morethan Paul Ceglia’s latest scam. The discovery will include forensic examination of Ceglia’scomputers, as well as the original version of the purported contract. When this testing confirmsthat all of these documents are forgeries, this lawsuit will end immediately. FACTUAL AND PROCEDURAL BACKGROUND 1. Zuckerberg’s Work For StreetFax In 2003. In early 2003, Mark Zuckerberg was a freshman at Harvard University. ZuckerbergDecl., ¶ 6. He saw an online job listing regarding development of a web site. Id. He respondedto the listing and learned that the project was for a company called StreetFax, which used theweb site StreetFax.com. Id. StreetFax.com was a web site that provided a database ofphotographs of traffic intersections for use by insurance adjustors. In or about April 2003, Zuckerberg agreed to provide limited web site developmentservices for StreetFax and signed a contract memorializing this agreement. Zuckerberg Decl.,¶ 7. The contract was provided to Zuckerberg by Paul Ceglia. Id. The document attached as Exhibit A to the Amended Complaint is not the contract thatZuckerberg signed. Zuckerberg Decl., ¶ 8. The contract that Zuckerberg signed only concerned 4
  • 9. web site development for StreetFax. Id., ¶ 9. It did not mention or concern Thefacebook.com, orany related social networking service or web site. Id. Zuckerberg did not enter into, and hasnever entered into, any contract or agreement with Ceglia or StreetFax, concerningThefacebook.com, or any related social networking web site. Id., ¶ 10. Zuckerberg performed his web development work for StreetFax and it is undisputed thatCeglia had no contact or communications with Zuckerberg during the years that followed. 2. In 2010, Ceglia Reappears And Claims To Own 84 Percent Of Facebook, Inc. Zuckerberg launched Thefacebook.com on February 4, 2004, more than nine monthsafter he purportedly signed the contract attached to Ceglia’s complaint. In the years thatfollowed, Facebook underwent astronomical growth and is now widely celebrated as one of thegreat recent success stories in American business. What started as a small company managed byZuckerberg and a handful of friends from a room in a summer sublet has now transformed into abusiness with thousands of employees and more than 500 million users worldwide. It is acompany that spans the globe and has revolutionized the ways in which people connect and sharewith one another. In 2010 — more than six years after Zuckerberg’s dealings with StreetFax — Cegliaemerged from out of the blue with a lawsuit. Ceglia attached to his complaint a documentpurporting to be a contract he signed with Zuckerberg in April 2003. That document addressesnot just the StreetFax project but makes references to a project described variously as “The FaceBook” and “The Page Book.” Ceglia claimed that the purported contract entitled him to 84percent of Facebook, Inc. As to why he had remained silent for the past seven years, Cegliaexplained that he had recently discovered the purported contract when he was looking throughhis papers in the wake of one of his recent arrests. See Bob Van Voris, Facebook Would-Be 5
  • 10. Owner Says He Owes His Claim to Arrest, Bloomberg, Aug. 2, 2010. Ceglia stated that hislawsuit against Zuckerberg “wouldn’t have been possible if state troopers hadn’t come to hishouse in October to arrest him for fraud.” Id. Ceglia filed his lawsuit in state court, alleging a breach of contract claim. Defendantsremoved the case to this Court on diversity grounds. Ceglia sought remand on the theory thatZuckerberg — who has lived and worked year-round in California for years, as would beexpected of the CEO of a major California-based company — is actually a domiciliary of NewYork. This Court rejected Ceglia’s argument and denied remand. Ceglia v. Zuckerberg, 2011WL 1108607 (W.D.N.Y. Mar. 28, 2011). 3. Ceglia Abandons His Original Claims And Changes His Story. During the remand proceedings, Defendants pointed out the incredible nature of Ceglia’sclaims and declared that his lawsuit was a fraud based on a fabricated contract. In response,Ceglia did an about-face. He pulled back his original complaint, retained new lawyers, and fileda new complaint filled with new facts and new legal theories. The Amended Complaint isfundamentally inconsistent with the original complaint. Among other things, Ceglia dropped hisclaim that he owns 84 percent of Facebook, Inc., replacing it with a demand for 50 percent ofZuckerberg’s stake. Ceglia also alleged, for the first time, that he formed a general partnershipwith Zuckerberg. Whereas Ceglia had originally claimed that he signed the contract in 2003 andapparently forgot about it until 2010 when he discovered it amidst his papers, he now claimedthat after signing the contract he and Zuckerberg engaged in an intense period of creativecollaboration during which Ceglia contributed sweat equity, along with many innovativebusiness and marketing ideas. See Amended Compl., ¶¶ 31-52. These new allegations are based 6
  • 11. on what Ceglia alleges are emails to and from Zuckerberg — emails that are not mentioned inthe original complaint and are not attached to the Amended Complaint. CEGLIA’S DOCUMENTS ARE FORGERIES Mark Zuckerberg has sworn under oath that he did not sign the contract attached toCeglia’s Amended Complaint, that he did not write the emails Ceglia attributes to him, and thathe did not receive any of the emails Ceglia claims to have sent him. Zuckerberg Decl. ¶¶ 5, 14.As set forth below, the evidence Defendants have gathered to date corroborates Zuckerberg’ssworn statements and confirms that Ceglia’s documents are forgeries. 1. The Purported Contract Is A Forgery. Ceglia’s claim that Zuckerberg entered into a contract concerning Thefacebook.com inApril 2003 is impossible as a matter of historical fact. Zuckerberg did not conceive of the ideafor Facebook until in or about December 2003. See Zuckerberg Decl., ¶ 11. This timing is confirmed by numerous public sources. The creation of Facebook hasbeen widely documented and there is no evidence that Zuckerberg had even thought ofThefacebook.com in April 2003, let alone that his thinking was sufficiently advanced that hewould enter into contracts to secure capital and grant ownership rights in the business. 1 1 See, e.g., David Kirkpatrick, THE FACEBOOK EFFECT 19-30 (2010) (“At the [fall 2003] semester’s end everyone in [Zuckerberg’s mathematics course] went out to dinner and ended up talking about the need for a ‘universal facebook.’ So Zuckerberg went home and built one. . . . Zuckerberg later said that it was the Crimson’s editorials [published towards the end of the 2003 fall semester] about Facemash that gave him the initial idea for how to build Thefacebook.”); Jose Antonio Vargas, The Face of Facebook, THE NEW YORKER, Sept. 20, 2010 (discussing winter of early 2004, Zuckerberg is quoted as describing how he and his friends “would hang out and go together to Pinocchio’s, the local pizza place, and talk about trends in technology. We’d say, ‘Isn’t it obvious that everyone was going to be on the Internet? Isn’t it, like, inevitable that there would be a huge social network of people?’”); Claire Hoffman, The [Footnote continued on next page] 7
  • 12. In addition to being impossible as a matter of historical fact, the purported contract is anobvious cut-and-paste job. This is apparent from the face of the document. Among other things,the column widths and margins are inconsistent, which indicates that the document has beenaltered and reproduced. Many words and sentences simply make no sense, and the document isriddled with internal inconsistencies and contradictions strongly indicative of fraud. Tellingly,there are many discrepancies between page 1 (which purports to convey an interest in “The FaceBook”) and page 2 (the page with Ceglia’s and Zuckerberg’s signatures, and which makes nomention of “The Face Book” or anything similar). Ceglia appears to have taken page 2 of thesigned StreetFax contract and appended it to a doctored version of page 1, which Ceglia hasedited by adding references to “The Face Book.” One notable difference is that page 1 and page 2 refer to StreetFax by different names:page 1 refers to “StreetFax LLC,” whereas page 2 refers to “StreetFax Inc.” This is a criticaldistinction. StreetFax LLC did not exist in April 2003 when the contract was purportedly signed[Footnote continued from previous page] Battle For Facebook, ROLLING STONE, Jun. 26, 2008 (“Zuckerberg has said under oath that he began writing the code for TheFacebook.com, his site’s first incarnation, in January . . . . It took him maybe a week or two, he claims, in between homework and finals. He was inspired, he said, by an editorial in The Harvard Crimson about his Facemash debacle [in November 2003].”); Lesley Stahl, The Face Behind Facebook, 60 MINUTES – CBS NEWS, Jan. 13, 2008, www.cbsnews.com/stories/2008/01/10/60- minutes/main3697442.shtml (describing the creation of thefacebook.com as occurring after the fall 2003 release of Facemash.com); John Cassidy, Me Media: How Hanging out on the Internet became big business, THE NEW YORKER, May 15, 2006 (describing the initial conception of Thefacebook.com as occurring in November/December 2003 and its launch in February 2004); Alan J. Tabak, Hundreds Register for New Facebook Web site – Facemash creator seeks new reputation with latest online project, THE HARVARD CRIMSON, Feb. 9, 2004 (“When Mark E. Zuckerberg ’06 grew impatient with the creation of an official universal Harvard facebook, he decided to take matters into his own hands. After about a week of coding, Zuckerberg launched thefacebook.com last Wednesday afternoon.”). 8
  • 13. — it was formed in August 2003. See Henne Decl., Ex. I (StreetFax LLC Articles ofOrganization). This is strong evidence that page 1 is a recent forgery: Ceglia apparently forgotthat the LLC did not exist in April 2003 when he set to work doctoring the purported contract. Frank Romano is Professor Emeritus at the Rochester Institute of Technology and one ofthe leading experts in the field of document authentication; his career in the printing industry hasspanned more than 50 years. Professor Romano examined the copy of the purported contractattached to the Amended Complaint and identified many “significant inconsistencies” betweenpage 1 and page 2. These include:  All references to the “The Face Book” and “The Page Book” appear only on page 1. Romano Decl., ¶ 16.  There are significant differences between the widths of the columns, margins, and “gutter” (the space between the columns) on pages 1 and 2. Specifically, the column widths are wider on page 1 than page 2, while the widths of the margins and “gutter” are narrower on page 1 than page 2. Id., ¶ 14(d).  The type size on page 1 is larger than the type size on page 2. Similarly, the type density on page 1 is darker than the type density on page 2. Id., ¶ 14(c).  On page 1, the spacing between the paragraphs varies between single, double, and triple spacing. On page 2, the spacing between paragraphs is uniformly single. Id., ¶ 14(b).  The indents on page 1 are wider than the indents on page 2. It is highly unusual for such inconsistencies to appear within a document because formatting is usually set up in advance and consistent throughout the document. Id., ¶ 14(a). 9
  • 14. Professor Romano concluded: Based on my professional experience and judgment, my opinion is that Page 1 and Page 2 of [the document] were printed at different times on different printers. This strongly indicates that, at least in part, [the document] is forged. Furthermore, all the references to “The Face Book” or “The Page Book” appear on Page 1. Thus, it is my conclusion that Page 1 of [the document] is an amateurish forgery.Romano Decl., ¶ 16 (emphasis added). 2. The Purported Emails Are Forgeries. Defendants engaged digital forensic examiners to review all of Zuckerberg’s emailscontained in the email account he used while a student at Harvard. That account contains emailsfrom the 2003-2004 time period. The emails Ceglia quotes in his Amended Complaint do notexist in the account. They are complete fabrications. The process through which Zuckerberg’s Harvard emails were obtained and reviewed isset forth in the attached declaration of Bryan Rose, a former Assistant United States Attorney.As Mr. Rose explains, the highly-regarded digital forensics firm Stroz Friedberg obtained acomplete and accurate copy of the entire contents of Zuckerberg’s Harvard University emailaccount, including both sent and received mail, as the account existed in October 2010. RoseDecl., ¶ 5. It also obtained a copy of Zuckerberg’s account as it existed in April 2011. Id., ¶ 4.Stroz Friedberg ran searches on all emails in the account using search terms containing the wordsand phrases taken from the purported emails excerpted in Ceglia’s Amended Complaint. Id., ¶ 7.Based on these searches, Mr. Rose determined that the purported emails were not inZuckerberg’s email account. Id. However, the account did contain more than 175 emails between Zuckerberg and Ceglia(or other persons affiliated with StreetFax) from 2003 and 2004. These verifiably genuine 10
  • 15. emails establish that Ceglia’s entire case is fiction and the story he tells in his AmendedComplaint is a lie. The real facts, as reflected in the emails captured from Zuckerberg’s account, are asfollows:  Zuckerberg exchanged more than 175 emails with Ceglia or other persons affiliated with StreetFax. None of these emails — not a single one — mentions “The Face Book,” “The Page Book,” Thefacebook.com, or any web site created by Zuckerberg. Rose Decl., ¶ 8.  The only topic of discussion between Zuckerberg and Ceglia (or his associates) was the StreetFax project. Id.  The emails show Ceglia profusely apologizing to Zuckerberg for failing to pay Zuckerberg for his work on the StreetFax web site and asking for more time to scrape the money together. For example, in a February 16, 2004 email to Zuckerberg, Ceglia wrote: “I can fully understand your frustration and hope that you have felt and feel from me sincere regret for such huge delays. . . . If there is any way I can assure you that I have absolutely every intention of paying you what is owed plus some when we finally catch up to our sales goals it would be appreciated to a level I cant express in words. After all this time please allow us a little more time to make things right with you. . . . I will nervously await your reply and hope you can grant us more time.” Rose Decl., Ex. D.  The emails show an increasingly desperate Ceglia offering excuse after excuse for his delay in paying, and claiming that he was seeking to sell his property to raise the money he owed Zuckerberg. For example, in a March 20, 2004 email to 11
  • 16. Zuckerberg, Ceglia wrote: “I unfortunately dont have any cash to give you right now” but “I have even listed my only rental property for sale in the hopes of clearing up my past debts.” Rose Decl., Ex. E.  The emails also show Ceglia attempting to persuade Zuckerberg to accept StreetFax equity (which was worthless) in lieu of payment. For example, in a March 31, 2004 email to Zuckerberg, Ceglia wrote: “As I try to come up with solutions one that I havent before thought of comes to mind. Stock. . . . . [I] realize that with our inability to pay you so far that this might not sound like an attractive offer . . . . It would be a tremendous load of my mind to reach an agreement with you Mark on this, I really hope you find this agreeable.” Rose Decl., Ex. F. These indisputably genuine emails — as they appear on the account maintained byHarvard University — directly contradict the invented narrative set forth in Ceglia’s AmendedComplaint and establish beyond any possible doubt that the purported emails Ceglia discusses inhis Amended Complaint are fabrications. Out of the more than 175 emails, there is not a singleone in which Zuckerberg and Ceglia discuss Facebook or any social networking web site. It is utterly implausible that Ceglia would have been begging a Harvard sophomore forextra time to raise money to pay a small debt, “nervously await[ing] [his] reply” (Rose Decl., Ex.D), without once mentioning Ceglia’s purported 50 percent stake in the Facebook business. Nordo the authentic emails contain any evidence — as his Amended Complaint alleges, see ¶¶ 45-46— that, just a few weeks before, he had relinquished an additional 34 percent stake (thepurported late penalty) voluntarily and without compensation. The authentic Ceglia emails —which show Ceglia apologizing, begging Zuckerberg’s forgiveness, offering excuse after excuse, 12
  • 17. asking for more time, even promising to sell his property to raise the money he owed Zuckerberg— demonstrate that the narrative in Ceglia’s complaint is utter fiction. That conclusion is further confirmed by linguistic analysis of the alleged emails Cegliapurports to quote in the Amended Complaint. Gerald McMenamin is Professor Emeritus ofLinguistics at California State University in Fresno and a forensic linguist who has renderedexpert opinions in more than 600 cases. Professor McMenamin studied the text of the purportedZuckerberg emails that appear in Ceglia’s Amended Complaint and determined that it isprobable that Zuckerberg was not the author. See McMenamin Decl. ¶ 4. ProfessorMcMenamin performed a stylistic analysis — examining the language and tone used in a sampleof emails genuinely authored by Zuckerberg to Ceglia and other persons affiliated with StreetFaxduring the relevant time period — and compared them to the language and tone of the purportedemails. Id., ¶¶ 8-10. He determined, among other things, that the Amended Complaint purportsto quote Zuckerberg spelling certain words differently than Zuckerberg repeatedly spells them inauthentic Zuckerberg emails. Id., ¶ 11. Likewise, the sentence structure of the purported emailsdiffers from the sentence structure in authentic Zuckerberg emails. Id. Based on these and manyother discrepancies, Professor McMenamin concluded that “it is probable that Mr. Zuckerberg isnot the author” of the purported emails in the Amended Complaint. Id., ¶ 4 (emphasis added). 3. Ceglia’s Long History Of Scams And Criminal Misconduct. Ceglia is a professional con artist. A comprehensive background investigation conductedby the nationally renowned investigative firm Kroll Associates, Inc. established that Ceglia is acareer criminal who has engaged in fraud, subterfuge and falsification of documents. From his1997 felony conviction through his 2009 arrest for scamming New Yorkers, Ceglia has a longrecord of criminal and fraudulent behavior that spans decades. The following is a summary of 13
  • 18. Ceglia’s known criminal history, as investigated and attested to by Don Henne, a formerLieutenant Commander and officer in the New York City Police Department with 20 years oflaw enforcement experience.  In March 1997, Ceglia was convicted in Texas of aggravated possession of a controlled substance, a first-degree felony. Court filings indicate he was in possession of more than 400 grams of psilocybin, including diluents. Psilocybin is a hallucinogenic compound found in certain mushrooms. Ceglia was sentenced to 10 years of probation and paid $15,000 of a $25,000 fine; the remaining $10,000 was suspended. Henne Decl., ¶ 10.  In May 2005, Ceglia was arrested in Florida for trespass while trying to sell property in a private orange grove to an elderly couple. Ceglia falsely told the arresting officer that he had an easement along the grove. The rightful property owner confirmed that no such easement existed and insisted on pressing charges. In October 2005, Ceglia pleaded no contest to first-degree misdemeanor trespass, and was ordered to pay a fine. Id., ¶ 12.  That trespass incident appears to be part of a wide-ranging criminal land scam involving the fraudulent sale of land in New York and Florida. Working from his base in Wellsville, Ceglia defrauded numerous victims by, among other things, (1) fraudulently misrepresenting tracts of land as buildable or useable as residential tracts when, in fact, they were not; (2) engaging in “shill bidding” on eBay, thus artificially inflating the price of the land being auctioned; and (3) in some cases, simply accepting down payments and financing payments for land that he did not own and was in no position to sell. Id., ¶¶ 16-24. 14
  • 19.  Ceglia’s falsification of documents did not begin with this case. Ceglia furthered his land scam by forging official government documents. Kroll investigators shared with Florida authorities the purported government document that Ceglia had provided to at least two of his victims to facilitate his sales of non-buildable land. After examining the document, the Director of the Polk County (Florida) Land Development Division stated that it had likely been doctored by removing the conditions necessary for a building permit to be obtained and having “whited out” the identifying parcel number. Id., ¶¶ 20-22.  In 2009, Ceglia was arrested and charged with consumer fraud by the Allegany County District Attorney’s Office and sued by then-Attorney General Andrew Cuomo. Ceglia was charged with running a scam in which local residents bought wood pellets for heating purposes that he never actually delivered. Id., ¶¶ 5-8. Resolution of the civil case was contingent on Ceglia paying $25,000 in penalties, and more than $100,000 in restitution to the dozens of customers that he victimized. Id., ¶ 6. ARGUMENT District courts within the Second Circuit have broad discretion to expedite and sequencediscovery. As shown below, Defendants have established good cause warranting expediteddiscovery into the authenticity (or lack thereof) of the purported contract and emails on whichCeglia bases his claims. All other discovery should be stayed until this initial inquiry iscomplete. 15
  • 20. I. Federal Courts Have Broad Discretion To Order Expedited, Staged Discovery. District courts may grant expedited discovery under Federal Rule of Civil Procedure26(d)(1) based on “the flexible standard of reasonableness and good cause.” Ayyash v. Bank al-Madina, 233 F.R.D. 325, 327 (S.D.N.Y. 2005). Determining whether good cause exists typicallyrequires weighing the prejudice the moving party will suffer from delay against the prejudice, ifany, that the responding party will suffer from expedited discovery. See OMG Fidelity, Inc. v.Sirius Technologies, Inc., 239 F.R.D. 300, 305 (N.D.N.Y. 2006) (granting expedited discoverybased on “a comparison of the potential prejudice which will be suffered by the defendant ifdiscovery is permitted, and that which will be experienced by the plaintiff if denied theopportunity for discovery at this stage”). Courts have found the “good cause” standard satisfied in cases where there areindications that an ongoing fraud is threatening the integrity of the judicial process. Forexample, in Stern v. Cosby, 246 F.R.D. 453, 457-58 (S.D.N.Y. 2007) (Chin, J.), the court grantedexpedited discovery into whether the defendant was “attempting to obstruct justice by offering topay money” to witnesses for their testimony, because if the defendant “was actually attemptingto obstruct justice, her efforts could very well have endangered the integrity of the judicialprocess.” The court explained that the victimized party’s “desire to explore this questionexpeditiously — before full and normal discovery — is reasonable and understandable.” Id.The court granted expedited discovery based on the plaintiff’s prima facie evidentiary showingthat a fraud on the court was occurring. See id. (explaining that the defendant’s lawyer “mayhave to do things in a different sequence from what she would otherwise have preferred, but I amsufficiently concerned about what I have heard . . . that I believe these matters should beexplored expeditiously”). 16
  • 21. Indeed, this Court has granted expedited discovery based on the movant’s argument thatimmediate and targeted discovery was necessary to determine whether the opposing party wasperpetrating a fraud. See UnitedHealthCare Services v. Miller, No. 1:09-cv-00276-RJA-LGF(W.D.N.Y. Apr. 20, 2009). In that case, the plaintiff UnitedHealthCare Services suspected thatthe defendant had engaged in a fraudulent scheme by fabricating insured employee accounts andseeking reimbursement for fictional insurance claims. This Court determined that the companyhad demonstrated good cause and ordered expedited discovery to obtain documents anddepositions concerning the potential fraud. Id. (ECF #7). Similarly, the Court granted expediteddiscovery in U.S. Commodity Futures Trading Commission v. Atwood & James, Ltd., 2009 WL666970, at *5 (W.D.N.Y. Jan. 23, 2009), explaining that good cause existed to permit expediteddiscovery “for the purpose of discovering the nature, location, status and extent of [the opposingparty’s] alleged wrongdoing (including but not limited to the possible involvement of others). . . .” Other courts have reached similar conclusions. See, e.g., Ayyash, 233 F.R.D. at 326-27(Lynch, J.) (granting expedited discovery into the location of defendants’ assets based onplaintiff’s “strong evidentiary showing” that defendants had engaged in fraud); Amari v. Spillan,2008 WL 5378339, at *1, 3 (S.D. Ohio Dec. 19, 2008) (plaintiff’s “need for” expediteddiscovery “outweigh[ed] the prejudice to Defendants” where a three-year “scam” involvingfraudulent financial transactions had deprived plaintiff of stock). The “good cause” standard is also satisfied when delaying discovery could result in thealteration or destruction of evidence. In Physicians Interactive v. Lathian Systems Inc., 2003 WL23018270 (E.D. Va. Dec. 5, 2003), which involved claims of computer-server hacking and theftof software code, the court found “unusual circumstances or conditions that would likelyprejudice” the plaintiff absent expedited discovery — “electronic evidence [was] at issue,” and 17
  • 22. “[e]lectronic evidence can easily be erased and manipulated.” Id. at *10. The court allowed theplaintiff “to enter the sites where the computers used in the alleged attacks [were] located and toobtain a ‘mirror image’ of the computer equipment containing electronic data relating toDefendants’ alleged attacks on” the plaintiff’s server. Id. Finally, the “good cause” standard is satisfied where “expedited discovery wouldultimately conserve party and court resources and expedite the litigation.” Semitool, Inc. v.Tokyo Electron Am., Inc., 208 F.R.D. 273, 276 (N.D. Cal. 2002). In Semitool, the court granted“narrowly tailored” expedited discovery, emphasizing that the plaintiff sought nothing more than“existing documents and a physical inspection.” Id. at 277. The court reasoned that “this is acase where the parties are both represented by sophisticated counsel and have engaged in pre-litigation discussion for over a year.” Id. For those reasons, “the Court is unable to discern anyreal prejudice to Defendants in advancing discovery by a modest amount of time.” Id. District courts also enjoy broad authority to sequence discovery. This power is expresslyconferred by Federal Rule of Civil Procedure 26(d), which provides that a district court mayorder that discovery proceed in stages based on the convenience of parties or witnesses, or when“the interests of justice” so warrant. The Supreme Court has explained that this Rule “vests thetrial judge with broad discretion . . . to dictate the sequence of discovery.” Crawford-el v.Britton, 523 U.S. 574, 598 (1998) (emphasis added). The broad discretion conferred by theFederal Rules “create[s] many options for the district judge,” who may, for example, permit“only a focused deposition . . . before allowing any additional discovery” or who “may postponeall inquiry regarding [a party’s] subjective motive until discovery has been had on objectivefactual questions.” Id. at 599. See also Occidental Chem. Corp. v. OHM Remediation Servs.,168 F.R.D. 13, 14 (W.D.N.Y. 1996) (Foschio, J.) (“Rule 26(d) authorizes the court to order the 18
  • 23. sequence of discovery upon motion” and “[a]n order regarding the sequence of discovery is atthe discretion of the trial judge”); Affymetrix, Inc. v. PE Corp., 219 F. Supp. 2d 390, 398-99(S.D.N.Y. 2002) (sequencing discovery); Damiano v. Sony Music Entertainment, Inc., 168F.R.D. 485, 493 (D.N.J. 1996) (same); Mann v. Levy, 776 F. Supp. 808, 813 (S.D.N.Y. 1991)(same).II. Defendants Have Demonstrated Good Cause. This Court should grant Defendants targeted, expedited discovery into the authenticity —or lack thereof — of the documents on which Ceglia has based his lawsuit. A. Expedited Discovery Is Warranted To Prevent Fraud On The Court And Further Tampering With Electronic Records. There is considerable evidence that Ceglia is perpetrating a fraud on the Court. Asdemonstrated above, Defendants have already gathered substantial proof that Ceglia fabricatedthe emails quoted in his Amended Complaint, just as he doctored the contract on which he basesthis entire lawsuit. Here, as in Stern, 246 F.R.D. at 457, expedited discovery is warranted to haltan ongoing scheme to frustrate the administration of justice. Forcing Defendants to enduremonths of burdensome discovery based on Ceglia’s fraudulent claims would be a manifestinjustice. There is absolutely no reason to subject Defendants to depositions, written discoveryand document production when this entire lawsuit will be terminated once Ceglia produces forinspection his computers and the originals of the documents on which he bases his claims. Norshould the Court be forced to devote judicial resources to supervising a concocted lawsuit thatrests on a lie. The integrity of the judicial process is best served by terminating a fraudulentlawsuit at its inception rather than by permitting the fraud to move forward and draining moreresources from the innocent parties and the Court. 19
  • 24. Expedited discovery is also warranted to prevent further tampering with emails and otherelectronic records that “can easily be erased and manipulated.” Physicians Interactive, 2003 WL23018270, at *10 (authorizing expedited imaging of computer equipment). An order seizingCeglia’s computers and permitting Defendants to examine them will ensure that electronicevidence — at least as it currently exists — will be preserved and not subject to furthertampering. The order should encompass the computers at Ceglia’s parents’ house, which Cegliahas publicly stated contain the purported emails with Zuckerberg. See John Anderson, Cegliasaved e-mails to Facebook CEO Zuckerberg from Fassett House, WELLSVILLE DAILY, Apr. 13,2011. Because Ceglia has ample “incentive . . . to hide” or delete evidence of his criminal acts,Ayyash, 233 F.R.D. at 327, time is of the essence. The examination of Ceglia’s computers will be performed using fast and widely-acceptedforensic testing procedures. Michael McGowan has extensive experience in e-forgeryinvestigations and has testified many times as a digital forensics expert, including on behalf ofthe United States Department of Justice in connection with an Enron task force prosecution. Ashe explains in the attached declaration, it is critical that Ceglia’s computers — and the nativeelectronic versions of the purported contract and emails — be examined. See McGowan Decl.,¶¶ 9-16. Under Mr. McGowan’s direction, the Stroz Friedberg firm will examine the metadataand other electronically stored information on Ceglia’s computers to assess the authenticity ofthe purported contract and emails. Immediate production of the original ink-written version of the purported contract isequally necessary, for the reasons set forth in the attached declarations of Gus Lesnevich, aformer forensic document examiner for the United States Secret Service, Lesnevich Decl. ¶¶ 15-18, and Albert Lyter, an expert in ink analysis who has served as an instructor at the FBI 20
  • 25. Academy and has testified in numerous high-profile cases, Lyter Decl., ¶¶ 6-7. As Mr.Lesnevich explains, “the poor reproduction quality and distortion” of the scanned copy make it“unsuitable” for analyzing the signatures and handwriting on the document. Lesnevich Decl.,¶ 15. And as Dr. Lyter makes clear, because the changes associated with aging to writing ink,printing ink and toner typically occur for only approximately two years, “delay in theexamination of the document may limit the ability to precisely determine the age of itsmaterials.” Lyter Decl., ¶ 6(a). B. Expedited Discovery Will Not Prejudice Ceglia. In contrast to the substantial harm to Defendants and the judicial system if this lawsuit ispermitted to proceed to full discovery, Ceglia will suffer no prejudice from being required toproduce the documents and emails on which he bases his lawsuit. These are “core documentscentral to [his] underlying case” that he would have to produce “in the normal course ofdiscovery” in any event. Semitool, 208 F.R.D. at 276. Indeed, Ceglia’s lawyer has publiclystated that he is already “prepared to move the case forward into discovery.” See Kashmir Hill,Facebook Calls Paul Ceglia A “Scam Artist” In The Other Facebook Ownership Lawsuit,www.forbes.com (May 26, 2011). In OMG Fidelity, the court explained that because “thediscovery now sought will take place at some juncture,” and because postponing discoverywould frustrate the defendant’s hope of bringing a prompt motion for relief, there was “no reasonto delay.” 239 F.R.D. 300, 305. So too here. Particularly in light of the public assertions by Ceglia’s lawyer that hepossesses forensic proof that these documents are genuine, this Court should order that his claimbe promptly verified through well-recognized testing procedures. Defendants anticipate that theywill be able to complete a forensic examination of the purported contract and emails promptly. 21
  • 26. Having waited seven years to bring this lawsuit, Ceglia cannot complain that he will beprejudiced by a short delay. C. Defendants Seek Narrowly Tailored Relief. The expedited, phased relief that Defendants seek is narrowly tailored and supported bygood cause. Defendants respectfully request an order: 1. Compelling immediate production of the original signed version of the purported contract attached to the Amended Complaint, the native electronic version of that document, and all copies of the purported contract in electronic or hard-copy form; 2. Compelling immediate production of the purported emails described in the Amended Complaint in their original, native electronic form, as well as all copies of the purported emails in electronic or hard-copy form; and 3. Immediately seizing, and permitting Defendants to inspect and image, every computer in Ceglia’s possession, custody, or control, including the computers at his parents’ house, which Ceglia has publicly identified as containing the purported emails. The Court should stay all other discovery until this initial phase of discovery has beencompleted. 22
  • 27. CONCLUSION For the foregoing reasons, this Court should grant Defendants’ Motion for ExpeditedDiscovery.Dated: New York, New York June 2, 2011 Respectfully submitted, /s/ Orin SnyderThomas H. Dupree, Jr. Orin SnyderGIBSON, DUNN & CRUTCHER LLP Alexander H. Southwell1050 Connecticut Avenue, NW GIBSON, DUNN & CRUTCHER LLPWashington, DC 20036 200 Park Avenue, 47th Floor(202) 955-8500 New York, NY 10166-0193 (212) 351-4000Terrance P. FlynnHARRIS BEACH PLLC726 Exchange StreetSuite 1000Buffalo, NY 14210(716) 200-5120 Attorneys for Defendants Mark Zuckerberg and Facebook, Inc. 23